Beats Sues Counterfeiters Ahead of Acquisition By Apple

Beats Electronics, the premium headphone maker that is in the process of being acquired by Apple (NASDAQ:AAPL), is suing Chinese counterfeiters in what will likely be one of its last actions as an independent company. While Apple is paying $3 billion to acquire Beats Electronics and Beats Music, the company has filed a lawsuit that alleges it is losing as much as $135 billion in annual sales to Chinese companies that are selling fake Beats headphones, reports AppleInsider.

“This action has been filed by Beats to combat online counterfeiters who trade upon Beats’ reputation and goodwill by selling and/or offering for sale unlicensed and counterfeit products featuring Beats’ trademarks,” stated Beats Electronics in a filing obtained byAppleInsider. “The Defendants create [fake internet storefronts] by the hundreds or even thousands and design them to appear to be selling genuine Beats products, while actually selling low-quality Counterfeit Beats Products to unknowing consumers.”

Genuine Beats headphones typically sell for hundreds of dollars, with some special edition versions of the headphones costing as much as $600. Although it is unknown what the company’s typical margins on the headphones are, the high cost and popularity of the products makes it an attractive target for counterfeiters. According to IDC data cited by The Carlyle Group, Beats Electronics held a 64 percent share of the $100-plus premium headphone market in the U.S. last September.

According to the court documents seen byAppleInsider, Beats Electronics accuses the counterfeiters of running a complex operation that uses specialized methods to avoid being discovered by law enforcement. Counterfeit Beats products are shipped “in small quantities via international mail to minimize detection by U.S. Customs and Border Protection,” noted Beats Electronics in its filing.